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The Philippine government went on a borrowing spree to support its pandemic response and make up for the plummeting revenues at the height of the coronavirus crisis. For 2020 alone, its gross borrowings 鈥 which does not include all the payments made during the period 鈥 hit P2.74 trillion, matching the P2.757 trillion debt incurred from 2017 to 2019.听
In this B-Side episode, Alvin P. Ang, a professor at the economics department of the Ateneo de Manila University, speaks with听大象传媒听reporter Beatrice M.听Laforga听about the government鈥檚 rising debt and its impact on the economy.听
TAKEAWAYS听
It鈥檚 natural for governments to borrow.听
Government borrowing primarily does two things, said Mr. Ang: pump-prime the economy by funding programs 鈥 such as infrastructure projects 鈥 that will drive growth; and address听crises, financial or otherwise.听听
In 2017,听the听Duterte听administration had to听borrow听money to听fund the massive听鈥Build, Build, Build鈥听program. And it borrowed听P2.74 trillion in 2020 to address the听coronavirus disease 2019 (COVID-19) pandemic, which听forced the government to implement lockdown measures that听ground the economy听to听a near halt.听
听鈥[When] the general confidence of businesses consumers听is听not there, they are not able to spend and produce so it is only the government, which is the third major player in the economy that comes in and borrows,鈥听Mr. Alvin said.听
鈥Manageable debt鈥 is听relative.听
It took 15 years for the Philippine government to bring down its debt-to-gross domestic product (GDP) ratio to an all-time low of 39.6% in 2019 from a high of 71.6% in 2004.听
鈥淚f your debt is lower than the whole capacity of the economy, you can still borrow. Even if you keep on borrowing more every year, but your GDP is increasing faster than your borrowings, then your debt-to-GDP is falling,鈥 said Mr. Ang.听鈥But I cannot say what is manageable because even countries as big as Japan and Singapore, they have a debt-to-gross domestic product ratio of more than 100%.鈥听听
He cautioned that a high debt stock could limit not just the state鈥s space to听incur听more debts in the future, but also its plans to expand further.听
The government has to spend as much as possible on health.听
The huge debt pile has to be reduced at some point. But with the crisis still ongoing, Mr. Ang听believes the government may need to wait a bit longer before听it听can start bringing down the debt levels and raise taxes to avoid hurting the economy鈥s long-term growth.听
鈥I think the next government will still have to borrow because this is not a usual crisis. What they need is to spend as much as possible on health, on building our capacities and increase confidence once again,鈥听he said. 鈥As long as these are muted, they have to spend. The government is the only entity that can really help the private sector and the consumers to get back into their groove of what they’re supposed to do.鈥听
This episode was recorded remotely on May 13. Produced by Paolo L. Lopez, and Sam L. Marcelo.听
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